The Cold Hard Truth
In recent years, the global economy has been quite volatile. This volatility, coupled with longer life expectancy, means that you not only have to start your financial planning earlier for retirement, but also to protect your funds against the effects of inflation and other economic uncertainties.
Research has shown that Singaporeans have the 3rd longest life expectancy ~ 82 years for males and 87 years for females. Read more. Average age is 84 years and living an average of 17 years after retirement. The amount of retired funds will only last for 9 years. Will you be ready for retirement?
According to another survey released on 13 October 2014, 44% of Singaporeans have not started saving for retirement. This is a worrying trend as two-thirds of the Singaporeans who have started to save for retirement, rely on their Central Provident Fund savings.
There are several specific challenges you need to take into consideration:
From inflation of 0.9% ten years ago, to inflation of 3% now, the cost of living is rapidly increasing. If we wish to maintain our current lifestyle, we have to keep up with the ballooning price levels.
Rising medical costs
Total medical costs in Singapore is expected to rise at an annual rate of 6.4% to hit S$22 billion by the end of this decade. The older you get, the more you tend to need to spend on health care.
Singapore’s aging population
More than a quarter of Singapore’s population will enter their silver years by 2030. The low birth rate and rapidly increasing inflation rate makes it imperative to start planning early for your retirement. Only then can you maintain financial freedom.
Asset-rich but Cash-poor
Many Singaporeans need to consider unlocking returns from assets to supplement their retirement fund. The challenge remains for Singaporeans to build a diversified retirement portfolio that earns returns high enough to beat inflation, as well as to ensure they will have sufficient cash in their later years, rather than being asset-rich but cash-poor.